17: Which Business Records Do You Need To Keep And How To Set Up A Record Retention Policy For Your


17: Which Business Records Do You Need To Keep And How To Set Up A Record Retention Policy For Your Small Business, Whether You Are A Solopreneur, Small Business Owner, You’re A Virtual Online Bookkeeper Or Are A Virtual Assistant Or VA


When you own your own business, you know how quickly the paperwork can start to pile up. It’s great to have processes in place to make sure you are handling all the day to day tasks, but once you tackle those obligations, what do you need to do with the documentation? This is where record retention policies for your small business are valuable. Once you set up these policies, you as a solopreneur, small business owner, virtual online bookkeeping business owner or virtual assistant can easily find the answers you are looking for. Should you keep a particular document, or is it okay to destroy it? How long do you need to keep documents? Are some documents more important to your small business than others? Is there a way to retain documents in QuickBooks? And, does it matter if you store your records electronically or in hard copy? In today’s episode, we are diving into each of these questions and more. If you feel like you are swimming in an ocean of paperwork and want to finally find out what you should be doing to get in control of all of it, listen in and before you know it, you’ll have your policies set up and you’ll know exactly where to put your documents so you can find them easily and how long you need to keep them.

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Show Notes:


When you own your own business, you know how quickly the paperwork can start to pile up. It’s great to have processes in place to make sure you are handling all the day to day tasks, but once you tackle those obligations, what do you need to do with the documentation? This is where record retention policies for your small business are valuable. Once you set up these policies, you as a solopreneur, small business owner, virtual online bookkeeping business owner or virtual assistant can easily find the answers you are looking for. Should you keep a particular document, or is it okay to destroy it? How long do you need to keep documents? Are some documents more important to your small business than others? Is there a way to retain documents in QuickBooks? And, does it matter if you store your records electronically or in hard copy? In today’s episode, we are diving into each of these questions and more. If you feel like you are swimming in an ocean of paperwork and want to finally find out what you should be doing to get in control of all of it, listen in and before you know it, you’ll have your policies set up and you’ll know exactly where to put your documents so you can find them easily and how long you need to keep them.



Welcome Back…Today we are talking about records retention. Setting up a records retention policy for your business is something all business owners should do, but to be honest…many small businesses owners are unsure about what documents they need to retain, how to keep those records and what’s the best way to store the documents they ultimately decide to keep.


When setting up your records retention policy, take into consideration what the IRS is looking for as well as any other requirements you may have in your business such as requirements from your insurance company. You may also want to keep records for any lawsuit, claim or work-related accident for a longer period than generally recommended. Your business ownership records should be kept indefinitely. These would include business formation documents, annual meeting minutes, by-laws, stock certificates, lease agreements as well as permits and licenses just to name a few.


Create a retention policy for documents like your business tax returns, financial statements, payroll tax records, employee files, job applications and human resource files. You will also want to have a retention policy in place for any supporting documents.


So, how long do you actually need to keep these records? Other than the records mentioned previously with longer retention periods, you can normally follow the seven-year rule. The IRS says, “You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Generally, this means you must keep records that support an item of income or deduction on a return until the period of limitations for that return runs out. The period of limitations is the period of time in which you can amend your return to claim a credit or refund, or the IRS can assess additional tax.” Most lawyers and accountants recommend keeping the original documents for at least seven years. This is normally a sufficient amount of time for tax audits or lawsuits.


What supporting documents are you required to keep for your small business? The IRS wants to make sure you have supporting documents to prove any income items and deductions you have on your tax return. These supporting documents would consist of, but are not limited to invoices, sales receipts, bills, credit card receipts, automatic deductions or deposits, inventory, deposit slips, cancelled checks, payroll, and other transactions you may have in your business. These documents support the entries you make in your bookkeeping system which make up your balance sheet and income statement and ultimately are reflected in your tax return.


Now, you might be asking…which is better, electronic, or hard copy storage, and does it matter if you use one or the other method to store your records? I think the main point to consider here is to ensure you able to quickly locate the records that may be in question. When you store your hard copies, make sure you have them organized in a way you can find the information if you are ever audited. I would strongly recommend grouping your records by year and then breaking them down even further. You could keep your records by month or by customer, vendor, or type of transaction if you feel it would be easier to find in the future. I know many small business owners who keep their records on a month-to-month basis. When you wrap up your month with your bank reconciliations and compile your financial statements, this would be a great time to make sure you have all your supporting documents for that month. After you close out the month and you are ready to file your records away, you can do so either by hard copy, or you could scan and have each of the items saved electronically. You can use the same system you would use to store your hard copy documents to store your records electronically, but make sure you have a good backup system in place especially if you are destroying the original hard copy. According to the IRS, it doesn’t matter if you provide hard copy or an electronic copy of your supporting documents as long as they are properly reflecting the transactions you have recorded in your financial statements and tax return.


I want to add that whether you have a manual or computerized software system for your bookkeeping process, you still need to keep proper business records. If you are using a computerized system like QuickBooks to do your bookkeeping, they have options to scan and upload your supporting documents right to the transaction you are recording. This is a nice feature that helps you to quickly obtain the supporting document you are looking for with a click of a button in your software system.


In summary, putting effort into a record keeping policy may not seem like an important task, but if done properly you will surely help reduce the risk if, or when you need to your provide proof of your business records. When you decide you are going to get rid of old documents, make sure you do it in a safe and secure manner. As much as you want to protect your information when you are storing your business records, you want to make sure when these records are no longer needed, they are disposed of securely.


And, you know I’m going to ask…what’s at least one thing you will take away from this episode that will help your business succeed and grow your bottom line? If you need some accountability, join our PRIVATE Facebook community and post your action item, we’d love to support you.

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